A new economic report projects India to maintain its status as one of the world's fastest-expanding major economies, though growth is expected to moderate from recent highs. The Mastercard Economics Institute (MEI), in its Economic Outlook 2026, forecasts that India's real GDP growth will consolidate to 6.6 per cent in 2026, with inflation rising to 4.2 per cent.
From Boom to Sustainable Growth
This projection follows an anticipated strong performance in 2025, where the economy is estimated to grow by a robust 7.8 per cent with inflation at a low 2.2 per cent. The MEI report indicates that India's economy is shifting from a phase of above-trend expansion towards a more sustainable long-term growth path. "India's economy is expected to consolidate toward long-term trends in 2026," the institute stated, highlighting this transition.
The broader economic foundation remains strong, supported by a triad of policy initiatives, a young population, and rapid digital transformation. Specific domestic policy measures are expected to fuel activity. The report suggests that front-loaded monetary easing, income tax reforms, and a rationalisation of GST rates could give a significant boost to personal consumption, a key driver of the Indian economy.
Structural Strengths and External Challenges
Long-term structural factors continue to work in India's favour. Digitisation, technological advancements, and favourable demographics are cited as powerful forces that will likely keep India at the forefront of global economic growth among large nations. Furthermore, disinflationary trends from lower global goods and commodity prices could bolster India's growth resilience.
However, the outlook is not without its headwinds. The MEI cautioned that external challenges persist. High US tariffs may pose difficulties for labour-intensive export sectors such as textiles, gems, and jewellery. The IT services sector also faces risks from tightening immigration norms in key markets, which could impact labour mobility, travel, and remittance flows.
Trade Deal in Focus
Consequently, the progress on the ongoing US-India Bilateral Trade Agreement will be a critical area to watch in 2026. The report notes that these global shifts also open doors for India to diversify supply chains and expand goods trade through new bilateral and regional agreements. This evolution could fuel further growth in global capability centres and economic activity in Tier 2 and Tier 3 cities across the country.
To mitigate downside risks from global market volatility, the report emphasises the potential role of targeted export support policies. By leveraging its structural advantages and navigating external challenges, India is poised to maintain a robust and resilient economic trajectory in the coming years.
